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    <h4>What is environmental social governance?</h4>
    <p>Environmental, Social and Governance (ESG) is a comprehensive indicator that measures a company's environmental, social and corporate governance levels. Different from traditional financial indicators, ESG examines a company's performance from the perspectives of environment, society and corporate governance, and is an emerging corporate evaluation method. Specifically,</p>
    
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      <p><strong>Environmental aspects (E):</strong> refers to carbon emissions, environmental policies, waste pollution and management policies, energy use and management, natural resource consumption and management, biodiversity, regulatory compliance, etc.;</p>
      <p><strong>Social aspects (S):</strong> refers to gender balance, human rights policies, associations, health and safety, management training, labor standards, product responsibility, compliance, etc.;</p>
      <p><strong>Governance (G):</strong> refers to corporate governance, handling of corruption and bribery, anti-unfair competition, risk management, tax transparency, fair labor practices, ethical codes of conduct, and regulatory compliance.</p>
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    <div class="image-container">
      <img src="/images/plan/images/Aspose.Words.00c6ae9c-4589-4d2b-a1ec-ce3dad8febc9.001.png" alt="ESG概念图" />
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    <p>ESG investing, originating from socially responsible investing (SRI), is one of the three most important considerations within SRI. ESG investing originated in Europe and the United States, with the first US ESG fund established in 1971 and the first ESG index created in 1990. In 2006, the United Nations established the Principles for Responsible Investment (UNPRI). In its early days, over 80% of the signatories were from Europe and the United States, signifying widespread acceptance of ESG investing in both Europe and the United States.</p>

    <p>ESG is driving companies to shift from solely pursuing self-interest to maximizing social value. Data demonstrates that companies with strong ESG performance also excel in operational and financial performance. These companies are able to anticipate and manage current and future economic, environmental, and social opportunities and risks, focus on quality and productivity innovation, prioritize environmental protection, energy conservation, and emission reduction, reduce operating costs, and create competitive advantages and long-term value.</p>

    <h4>The connotation and value of ESG</h4>
    <p>In its consultation document for the new Environmental, Social and Governance Reporting Guide, the Hong Kong Stock Exchange (HKEX) stated that its role is to "ensure a fair, orderly, and well-informed market," and that an "informed" market must provide both financial and non-financial information. ESG can reflect a company's management strength and long-term development prospects. By compiling and publishing corporate social responsibility reports, companies can systematically analyze and analyze various liability risks, promote internal management improvements, and facilitate the implementation of corporate sustainability strategies across all aspects of their operations, thereby meeting the needs of various stakeholders and enhancing the company's image, influence, and market capitalization. The HKEX's new Guidelines explain how a company's ESG performance and reporting can enhance its value, covering the following eight aspects:</p>

    <ul class="esg-list">
      <li>Strengthen risk management</li>
      <li>Improve fundraising capabilities</li>
      <li>Supply chain needs</li>
      <li>Improve your reputation</li>
      <li>Reduce costs and increase profit margins</li>
      <li>Encourage technological and management innovation</li>
      <li>Cultivate talents and stabilize the team</li>
      <li>Enhance social recognition</li>
    </ul>

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      <img src="/images/plan/images/Aspose.Words.00c6ae9c-4589-4d2b-a1ec-ce3dad8febc9.002.png" alt="ESG价值图" />
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    <p>In recent years, investor demand for ESG information has rapidly increased. Investors understand more than ever the value of integrating ESG factors into their investment decisions to mitigate risk and identify opportunities. In a February 2020 McKinsey study, "The ESG Premium: A New Perspective on Value and Performance," 83% of executives and investment professionals stated that they expect ESG initiatives to deliver more value to shareholders within five years than they do today. However, most ESG information providers lack consistency, engagement, and foresight, creating widespread difficulties for investors hoping to leverage this input and integrate ESG factors for competitive advantage.</p>

    <h4>CSR-based ESG investing</h4>
    <p>The financial community generally believes that ESG factors have a decisive impact on corporate risk and returns. Companies with strong ESG performance can significantly reduce company-specific risks and positively impact their reputation. They can also increase customer loyalty, improve operations, enhance financial performance, and increase resilience in extreme downturns. This has led to the development of ESG investing.</p>

    <h5>Investment optimization methods that consider ESG:</h5>
    <ul class="esg-list">
      <li>Positive screening and negative elimination. Select sectors and companies that are above the average level of their peers in terms of ESG factors, and eliminate companies with negative effects and unacceptable ESG indicators.</li>
      <li>Integrate ESG factors into traditional fundamental analysis and other portfolio optimization models as an important dimension for evaluating companies</li>
      <li>Select specific sustainable development enterprises for investment based on the results</li>
    </ul>

    <p>This investment approach requires only minor adjustments to existing investment methods. Generally speaking, investors first identify environmental/social issues with relevant stakeholders, then establish financial and non-financial targets using standardized formulas or evaluation methods, and then determine the final investment objectives.</p>

    <h5>ESG screening sources:</h5>
    <p>Corporate Social Responsibility (CSR)/sustainability reports can effectively reflect a company's ESG performance. Whether a company diligently compiles non-financial information reports and quantifies and compares its ESG activities can demonstrate its willingness to engage with stakeholders, which is the foundation for measuring the effectiveness of corporate governance. Only by carefully assessing and evaluating various possible scenarios involving stakeholders can a relatively sound corporate governance model be established.</p>

    <h4>How to conduct ESG assessment?</h4>
    <p>Currently, more and more investors are aware of the risks of separating ESG-related issues from business fundamentals, leading to a rapid growth in ESG-based investment practices worldwide. However, most ESG information providers lack consistency, standards, and foresight, creating widespread difficulties for investors hoping to incorporate ESG factors into their investment decisions.</p>

    <p>An ESG assessment is a forward-looking opinion on the ability to manage potential future environmental, social, and corporate governance risks and opportunities. With the company's permission, the ESG assessment utilizes responses from the Standard & Poor's (S&P) Global Corporate Sustainability Assessment (CSA) and is further supported by deeper engagement with ratings analysts, company/bank management, and board members. Each ESG assessment includes two inputs: the ESG profile and preparedness opinions.</p>

    <p>The ESG Profile summarizes S&P Global Ratings' current and recent effectiveness opinion on a company's ability to manage its risk exposures and identify opportunities relative to its peers. The ESG Profile score combines S&P Global Ratings' assessment of three profiles, weighted 30% for environmental, 30% for social, and 40% for governance. This means that over 40% of the ESG Profile depends on how we apply macro-industry and regional analysis to the entity. To develop the ESG score, we develop an ESG risk profile (below), which integrates our analytical industry knowledge and expertise, providing the foundation for in-depth macro-industry and regional analysis and enabling cross-industry and cross-regional comparability of ESG assessments. To participate in the ESG assessment, companies are invited to complete the S&P Global Corporate Sustainability Assessment (S&P Global CSA). The responses provided by the assessed company in the CSA questionnaire are used by analysts as a starting point for their ESG analysis and comparison of the company.</p>

    <div class="image-container">
      <img src="/images/plan/images/Aspose.Words.00c6ae9c-4589-4d2b-a1ec-ce3dad8febc9.003.jpg" alt="ESG评估流程图" />
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    <p>A preparedness opinion primarily compiles a qualitative view of a company's ability to anticipate and adapt to various potential disruptions. To develop the preparedness opinion, S&P Global Ratings analysts meet with senior management and board members to build their understanding and assessment of emerging trends and potential business disruptors, as well as their long-term planning. By incorporating the board's and management's perspectives on the company's highest risks and its future direction, the preparedness opinion adds a further dimension and highlights to investors how the company's strategy can deliver potential long-term value.</p>

    <div class="image-container">
      <img src="/images/plan/images/Aspose.Words.00c6ae9c-4589-4d2b-a1ec-ce3dad8febc9.004.png" alt="ESG准备度评估" />
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    <p>Once S&P Global Ratings determines a company's ESG profile score and readiness opinion, it generates an overall ESG assessment score out of 100. Rated companies receive a report detailing the ESG analysis and delving into the rationale behind the score.</p>

    <h4>How to apply ESG ratings?</h4>
    <p>The resulting ESG report can be kept confidential and used as an internal strategic tool, or it can be shared with investors and stakeholders as the company deems appropriate. Upon request, S&P Global Ratings may assess a company against the disclosure standards of the Task Force on Climate-related Financial Disclosures (TCFD).</p>

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      <p><strong>What is the TCFD?</strong> The Task Force on Climate-related Financial Disclosures (TCFD) defines and identifies several risks and opportunities related to climate change, categorizing climate risks into transition risks and physical risks. These risks are then quantified through financial indicators to better support investment and financing for the global low-carbon transition. The TCFD has garnered support from 3,082 institutions in 93 countries worldwide.</p>
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    <h4>How do investors use it?</h4>
    <ul class="esg-list">
      <li>Strengthen ESG analysis to understand future risks and opportunities and how prepared companies are to manage them effectively</li>
      <li>Helps understand how management and the board will use ESG to support long-term business strategy</li>
      <li>Can help inform management engagement</li>
      <li>The score can be used as a KPI for sustainability-related financing or for building thematic portfolios.</li>
    </ul>

    <h4>How businesses use it</h4>
    <ul class="esg-list">
      <li>Support market entry by demonstrating awareness of future risks and opportunities and the effectiveness of management's long-term sustainability strategy</li>
      <li>Assisting companies and/or their investors with benchmarking</li>
      <li>Use as a tool to improve communication and build confidence by providing a second opinion</li>
      <li>The score can be used as a KPI for sustainability-related financing</li>
    </ul>
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